March 1, 2004

5 Min Read
Simply Irresistible Revenue

There is little argument that records storage can be the highest yield storage space you manage. This article discusses the objectives and expense variables that ensure high revenue yield.

The most important element of records storage and service revenue is the conversion of rentable square feet to cubic feet, as the basis of rental is always the cubic foot. Following is the most common rule of thumb to estimate gross revenues:

  1. Calculate your total available square footage.

  2. Calculate the total cubic footage by multiplying square footage by the height of the space.

  3. Calculate total available cubic footage (that space not consumed by racking and walkways) by multiplying total cubic footage by .45.

  4. Calculate your potential monthly storage revenue by multiplying your available cubic footage by 35 cents (the average per-square- foot rate).

  5. Multiply your potential monthly storage revenue by 1.65 to account for the collection of service fees. This is your potential monthly total revenue, or gross revenue.

Although I recommend this model for revenue projections, I consider it conservative. The reality can be a much higher yield per cubic foot, or an increase of as much as twice the 35-cent rate. (This is based on several factors, which are explained in a previous article titled Price and Yield Differences, Inside Self-Storage, May 2003). Net profits can be managed to high levels depending on how you leverage existing assets such as space, people and outsourced resources.

Now, lets look at three ways of maximizing storage yield: creative selling methods, maximizing minimum-service levels and innovative management options.

Creative Selling Methods

Full-service records centers fear you! Some say we have awoken the sleeping giant. Self-storage facilities across the United States may actually contain as many boxes of records as industry giant Iron Mountain; the problem is most facility owners do not realize records are being stored in their space. So how do you convert part of your self-storage facility into a maximum-profit/minimum-effort records-storage business? Creative selling is the first step.

The key to great results from creative selling is to understand the services you provide and how to maximize margins while minimizing effort. The approach I recommend is called the Services Guidebook. This tool is like a football teams play book. The components of the guidebook include service name, service definition, pricing strategy, resource requirements, value to the client and compensation strategy. Selling methods can vary with up to seven levels of selling that you determine. You can review the selling levels in the October 2003 issue of ISS.

Maximizing Minimum-Service Levels

Lets turn our focus to service margins. Valuable services are the key to long-term client relationships, high margins and maximized yield per storage unit. The base service is, of course, storage.

This represents the annuity portion of the business, since records grow at a compound rate of 13 percent or more annually, net of destruction. According to industry studies, boxes remain in storage for an average of 16 years. Retrieval services can be outsourced so margins can be managed to about 40 percent. Other levels of service can average from 50 percent to 90 percent margins. The higher you raise the service levels, the greater the yield per cubic foot of storage.

Services can be managed to nearly a virtual environment in which all activities are outsourced with a residual profit. This must be carefully planned along with the development of the Services Guidebook, resource requirements and margin-management planning.

Innovative Management Options

What do you want to do with your records-storage business? Some owners only want to have a high-yield, minimal-service facility; others want to offer full services and compete in a broader marketplace. Regardless which of the many operating and marketing plans you choose, you will need to manage them to those results.

I recommend innovative management methods. What does that mean? The word management is defined in most 101 classes as getting things done through people. I have broadened this to include several concepts and techniques: effective use of technology, strategic outsourcing, batch processing and personnel abatement. Management now can be defined as getting things done through resources, processes and technology.

If you want to get there from hereno matter where there isyou need a road map. Road maps come from those who have been there before you. Our road is one less traveled. Seek assistance from fellow travelers.

Operating-Expense Management

The most common question I hear from those investigating records storage is, How do I plan for my expenses? We can easily target sales volumes based on market size, selling strategy and service levels. However, targeting expenses requires an operating plan that includes the service guidebook, outsourced resource availability and your technology choices. Management of these is, of course, essential. Management of anything requires an understanding of the goal, business processes and measurement methods.

The road map is the best analogy I can offer. Before you take a trip, you must know where you are and where you want to goa starting and an ending point. The next question is, how do you get there? Of course, the choices may be several, including planes, trains and automobiles and other options. The final question is, why do you want to get there? The answer may range from a quick business meeting to a leisurely vacation.

Now that you know these things, you can plan your trip. You look to those that have been there before you. You find a road map that delineates the distance, travel methods and time to the destination. You set your goal perhaps to get there quickly for a meeting and return as fast as you can. The road map helps you meet the goal. It also will tell you if you are off course and how to get back on. If you dont have a road map, you will get lost and miss your destination. Its as simple as that.

Regular columnist Cary McGovern, CRM, is the principal of FileMan Records Management, which offers full-service records-management assistance for commercial records storage startups, marketing assistance, and sales training in commercial records-management operations. For assistance in feasibility determination, operational implementation or marketing support, call 877.FILEMAN; e-mail [email protected];

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